Caligula Corp. has 840,000 shares outstanding, currently trading at $64. The company is borrowing $4,000,000 to buy

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Caligula Corp. has 840,000 shares outstanding, currently trading at $64. The company is borrowing $4,000,000 to buy back some shares. The interest rate is 13%. Assume that the buy-back does not affect the stock price.

a) What is the break-even EBIT if there are no taxes?

b) What is the break-even EBIT if the tax rate is 34%?

Related Book For answer-question

Financial Accounting Tools for business decision making

ISBN: 978-0470534779

6th Edition

Authors: Paul D. Kimmel, Jerry J. Weygandt, Donald E. Kieso

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Posted Date: Jan 10, 2021 01:05 PM

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Caligula Corp. has 840,000 shares outstanding, currently trading at $64. The company is borrowing $4,000,000 to buy

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a In case of no taxes We have to find the breakeven EBIT It mea... View the full answer

Financial Accounting Tools for business decision making

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